Andy Grove’s Economic Solution

IF? IF what he’s suggesting SOUNDS protectionist?

There was a time that much of an economy was local. We’re WAY past that time. We are in a global economy and no amount of pretending or protectionism is going to change that fact. There’s no question that we could do what he suggests. However, doing so would raise the prices of many goods (and ultimately services) in such a way that it is far from clear that the net effect on the US economy would be positive.

Actually, I think that we’d be in pretty good shape now if so many people hadn’t been living beyond their means. People grew accustomed not only to their standard of living but to the pace of improvement in their standard of living. Too many people paid for an improvement in their standard of living with borrowed money. Now that the economy has been in a sustained downturn, not only do they have no cushion on which to live, but they have excessive debt. Thankfully, people are waking up and are paying down their individual debt. Unfortunately for the economy (in the short-term), this means that they are not buying things at the pace they did before the recession started.

I’m a believer that it is in the long-term best interests of not only the US economy but the global economy to raise the standard of living of everyone around the world. This creates world-wide consumers of the products we make and global competition for the production of the products we buy. These are good things. However, a global economy will not be in equilibrium with enormous disparities in wages, working conditions, and standards of living across the globe. So, there will be (I hope) a decrease in this disparity as the third-world standards of living improve at a rate greater than ours does. This does not necessarily require that our standard of living decreases. It simply requires that their standard of living increases at a more rapid pace than our standard of living increases. One thing is clear (IMHO): We need to quit assuming that our standard of living will continue to rise at a breakneck pace (and we need to quit pretending that it is by spending more than we earn).